MONTPELIER — The city of Burlington has 404 tax–exempt properties with an estimated assessed value of $1.66 billion — the most exempt property of any community in the state.

If all this property were taxed, it would generate about $39 million in city and statewide school taxes.

Statewide, more than 8,800 properties have exemptions from state and municipal property taxes with a collective, estimated value of $6 billion.

No one has suggested eliminating the more than a dozen statutory categories of property tax exemptions that benefit houses of worship, charitable organizations, the University of Vermont and Fletcher Allen Health Care.

But should nonprofit organizations contribute something?

That's a question Rep. Alison Clarkson, D-Woodstock, has posed. Clarkson is vice chairwoman of a panel the Legislature directed to review the policy justification for many exemptions and review the definitions used in some categories with an eye toward ensuring uniform identification of exempt properties throughout the state.

"They benefit from municipal services and they benefit from an educated workforce, so it makes sense they begin to contribute something," Clarkson said.

Revamping exemptions, however, is sure to be challenging, which proved to be the case last time lawmakers looked into the question.

After passage of a statewide education property tax in 1997, lawmakers realized that inconsistencies in the application of exemptions among towns suddenly mattered. The Legislature appointed a commission to study exemptions and recommend ways to limit their number and eliminate inconsistencies. The panel made recommendations to lawmakers in 1999 and the House passed a bill making some changes the following year, but the measure came over late in the session and died in the Senate.

Lawmakers haven't tried again until now. The impetus is back-to-back increases in the education property tax rates. A broader tax base would lessen the need for rate increases and thus the burden on those who are paying now.

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Wednesday, the new study panel discussed recommended tweaks to tax exemptions offered by Bill Johnson, director of the division of property valuation. Johnson also serves on the study committee.

"There certainly are more issues that cause some frustration, but these are some of the biggest ones," Johnson said.

For example, Johnson's recommendations included figuring out how to treat properties in which there is a secondary use that doesn't qualify for an exemption. Johnson offered the example of a dry cleaning establishment in a campus building at Norwich University.

The panel also reviewed an updated version of the 1999 legislation.

"This is a template on which we can build," Clarkson said.

For example, the bill lacks the requirement that fraternal organizations with tax exemptions should provide annual certification that their charitable giving exceeds the amount of taxes they would have been assessed. Sen. Kevin Mullin, R-Rutland, the panel's chairman, has proposed this requirement for consideration.

The committee decided it also wanted to look at bill provisions that would put into practice the position Clarkson articulated — that every tax exempt property make a contribution to the Education Fund and to municipal coffers.

That is the approach that the city of Boston has taken — asking nonprofit organizations to pay an amount equal to 25 percent of the the tax that would have been paid on their properties.

Historic hodgepodge

Vermont's collection of property tax exemptions have accumulated over two centuries. An exemption for cemeteries existed when Vermont became a state in 1791. The exemption for the University of Vermont dates from 1802.

An exemption for fraternities and societies was enacted in 1906, the same year lawmakers gave YMCAs exemptions. YWCAs were added in 1963.

A lawsuit in 1973 — Medical Center of Vermont v. city of Burlington — established that hospitals could be exempted under the public, pious and public charitable use category.

To qualify in this category, a 1989 court case established three guidelines:

In 1999, lawmakers made clear that federally qualified health center and federally designated rural health clinics would be exempt.

Not all health care facilities qualify, noted Johnson at the Division of Property Valuation and Review. He cited the treatment facility operated by Washington County Mental Health, which is taxed, and the agency's administrative offices, which are tax exempt under the public, pious of charitable category.

Johnson gave his colleagues on the study panel guidelines that the tax department provides to help listers make decisions on tax exemptions. It notes that "property used primarily for health or recreational purposes is not exempt unless it has been so voted by the legal voters of a town."

Mullin, the study panel chairman, acknowledged the complexity and political difficulties in revamping property tax exemptions, but remained hopeful.

"We have to figure out a way to have consistency," he said. "I'd like to see equity and fairness be the guiding principles."